Don’t let your small business dreams go out the window. Keep reading for 7 financial tips for the small business owner.
According to the Small Business Administration (SBA), 70 percent of small business ventures fail within the first 10 years of operation. This high rate of failure is attributed to a lack of enough capital, bad employees, stiff competition, and poor pricing models.
To avoid these pitfalls and grow your business beyond the first difficult stages, you need to know the solutions to each of the problems mentioned above.
Don’t let your small business dreams go out the window. Here are seven financial tips for the small business owner.
- Make the Business a Separate Entity
Always view the business as a different entity from yourself. Failure to do this will make it difficult to value the business, filing for taxes, and determining the profitability of your venture.
However, don’t forget to pay yourself a salary since you’re the owner and chief executive of your business.
- Set Up an Emergency Fund
Since a business is a risky venture, it advisable to set up an emergency fund for the periods when business is low or when you need to solve a time-sensitive problem.
You can do this by saving part of the profits each financial period. In a similar approach, you’ll need to save for your retirement as part of the savings.
- Diversify Your Investments
Invest in business ventures outside your immediate industry. These ventures will come in handy when your core business line experiences issues and you need cash to work with.
Also, avoid having too much cash at hand. That money is safer and more valuable as an investment elsewhere.
- Seek Experts in Specific Fields
While you may be the one who knows exactly what your business does, you need to hire experts in taxation, finance, human resource management, accounting, law, and other relevant areas.
These experts will enable you to focus on the business while they take care of its building blocks for smooth operations. Financial advice is especially invaluable during the infancy stages of your venture.
- Budget Your Expenses
You need a solid budget for running your business. This budget will determine what moves you should make, how much of capital you can commit to one project, and when to spend.
- Keep a Good Credit Score
A good credit score will enable you to get loans from lending institutions for expansion or solving problems. You simply need to have as little debt as possible for a good credit rating.
Small businesses fail to secure loans from traditional lending institutions owing to uncertainty in their sectors and their sizes. Fortunately, there are institutions where you can obtain bad credit loans to boost your business for faster growth.
- Insure Your Business
Good insurance will help your business overcome the tough times such as fire accidents, loss of working abilities, and abrupt changes in the law. Your lawyer should help you insure all the relevant areas in your line of business.
Make Use of These Tips for the Small Business Owner
With proper financial planning, your business will be among the few that survive beyond the early stages and grow into giant ventures in the long run. These tips for the small business owner will enable you to run a profitable and resilient business.
Feel free to share these tips with other small business owners to help them grow.